Housing Market Vibes: Is Affordability Making a Comeback?

If you've been staring at Zillow listings with one eye open, bracing for the monthly payment calculator to make you cry — good news: the housing market might finally be throwing buyers a tiny lifeline.

Let’s break down what’s happening with rates, prices, inflation, and why this fall might feel a little less brutal than last year.

Rates Are hinging on Dropping (And That’s a Big Deal)

Mortgage rates are trending lower — and that alone is reason to celebrate. Pair that with a likely Fed rate cut in September, and things are looking brighter.

Also:

• Home prices are starting to cool (just a bit).

• Buyers are getting more negotiation power.

• And yes, affordability is improving — slowly, but surely.

Is it still tough out there? Totally. But it’s not as tough as it was.

Inflation Update: “Not Bad” is the New Good (except in response to “how do I look”)

July’s inflation numbers came in kinda... meh. But in today's world, meh = good enough. Or as the youth say its like 6,6-7.

• Headline inflation: +2.7% year-over-year

• Core inflation (no food or energy): +3.1%, a slight rise

• Energy costs dropped: -1.1%

• Rent and housing costs are slowing a tad: +3.7%

TL;DR: Inflation isn’t fixed, but it’s not out of control either — and that keeps the Fed feeling OK about cutting rates soon.

Buyer’s Markets Are Back in Town

According to the latest MBS Highway survey, more agents are seeing a shift in power:

 In March:
Only 32% of real estate pros said buyers had the upper hand.

Now in August:
55% say it’s officially a buyer’s market.

Where the tables have turned:

• Florida (83%)

• Texas (72%)

• Arizona, Tennessee, Mississippi, Colorado, Utah, and Oklahoma — all 70%+

That means more wiggle room for offers, price drops, and closing cost help. If you’ve been sitting on the sidelines, this might be your moment.

A Word from the Treasury: “Cut Rates Already!”

Scott Bessent, the Treasury Secretary, made waves by saying the Fed should slash interest rates by 0.50% in September — and keep going after that.

 If that happens (and if mortgage rates follow suit), we could see:
30-year fixed rates drop to ~4.75%

Buyers would jump back in.
Sellers could finally sell.
Refinancers would have a field day.

 Note: Bessent doesn’t control the Fed, but his bold take got people (and bond markets) excited.

“Underwater” Mortgages Are Rare — Don't Panic

Let’s clear something up. Yes, a few headlines have mentioned “underwater mortgages” — but this is not 2009 all over again.

• Only 1% of U.S. mortgages are underwater today

• Compare that to 23% in 2009 (ouch)

Where it's showing up more:

• Cape Coral, FL: 7.8%

• Lakeland, FL: 4.4%

• San Antonio, TX: 4.3%

• Austin, TX: 4.2%

Reminder: A mortgage is “underwater” if your home is worth less than what you owe. If you bought recently with a small down payment and prices dipped — yeah, it can happen. But most homeowners are still swimming in positive equity.

Mortgage Rates Near 6.5% — So Close to a Surge!

As of mid-August, average 30-year mortgage rates are hovering around 6.58%. That’s down from last year’s highs, and it’s juuuust on the edge of bringing back serious buying activity.

Refinance applications are already ticking up — people are ready to act, they just want some rate stability before they jump in.

Quick Explainer: Fed Rates & Mortgage Rates — What's the Connection?

Let’s keep it simple:

The Fed sets the Fed Funds Rate — this is like the "base" interest rate for banks.

Mortgage rates tend to follow, but not instantly.
Markets often move ahead of Fed decisions based on expectations.

What’s Coming Next we are taking bets: Rate Cut Watch

Here’s what the market thinks the Fed will do this year:

👀 Translation: Lower rates are likely on the horizon, just not all at once.

What This Means for You

 Buyers:
The window is opening. If rates keep falling, competition will return — use this quieter moment to shop smart and negotiate.

Sellers:
Don’t be discouraged. If rates drop further, buyer activity should bounce back. For now, price competitively and consider incentives.

Homeowners:
If you bought at a higher rate, start watching the refinance window. Lower monthly payments could be closer than you think.

The Bottom Line

The housing market is waking up from its nap a bit cranky, and hair akimbo but still waking. Rates are looking at drifting down. Buyers are again starting testing the waters. Sellers are starting to adjust to the post 2020 selling prices.

Whether you’re planning to buy, sell, refinance — or just sit tight — the second half of 2025 could be your chance to make a smart move.